A rail strike? Not in this economy.

Nov 30, 2022

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President Joe Biden knew it was a risky move, stepping into a labor standoff to avert a rail strike at the height of the holiday season.

But as a Dec. 9 work stoppage loomed, the economic risks — not to mention health and safety concerns — outweighed any potential political blowback, the White House said Tuesday. Another worry: A GOP House could impose an even less labor-friendly deal if the dispute drags into next year.

Now, Biden is pinning his hopes on Democrats in Congress to resolve the impasse, our Ben White reports :

"Biden's decision to request Congress' intervention late Monday came after phone calls over recent days with Labor Secretary Marty Walsh, Agriculture Secretary Tom Vilsack and Transportation Secretary Pete Buttigieg, the trio of aides running point for the White House on the issue, three people familiar with the planning told POLITICO. In the end, they said, Biden figured that the blowback from unions and highly progressive members of Congress would be limited.

"'We hit a spot where even if we could get the parties to agree at a table, the period to ratify would run past the shutdown date' of Dec. 9, one top Biden aide said of the agonizing decision process. … 'So it just became impossible to get a deal agreed to and ratified before the key date.'"

A different route — Ben writes that Biden opposed using Congress' authority to force labor deals on railroad workers when he was a senator and resisted that route for months this time around.

"But with fertilizer companies making plans to stop shipments and rising threats to the movement of products needed for clean drinking water, Biden decided time was up.

"And the last thing the president or White House wanted was a crippling strike stopping the movement of around 40 percent worth of freight … Any such disruption could also add further upward pressure on inflation, which is still running at 40-year highs after massive government stimulus during the Covid-19 pandemic and amidst a big gap in heavy consumer demand and limited supplies of both available workers and materials used for finished products."

What's next? Senate Majority Leader Chuck Schumer and Minority Leader Mitch McConnell said Congress needs to act soon, and House Speaker Nancy Pelosi said she plans to hold a vote on a bill on the House floor today, our Alex Daugherty, Garrett Downs and Tanya Snyder report.

But it will be much more complicated in the Senate, where opponents from both parties have threatened to slow the action, saying it gives short shrift to rail workers who have been demanding sick leave, which was left out of the deal, they wrote.

IT'S WEDNESDAY — The U.S.A. lads have done it, and we aged 10 years during that stoppage time. Have tips, story ideas, feedback or calming strategies to share before Saturday's match? You know what to do: kdavidson@politico.com and ssutton@politico.com .

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Driving the Day

Revised third-quarter GDP data released at 8:30 a.m. … Fed Governor Michelle Bowman speaks at an event on the future of Minority Depository Institutions at 8:50 a.m. … Senate Banking hearing for FDIC nominees at 10 a.m. … Job openings and quits data released at 10 a.m. … Fed Governor Lisa Cook speaks on the outlook for monetary policy in Detroit at 12:35 p.m. … Fed Chair Jerome Powell speaks at the Brookings Institution at 1:30 p.m.

GET READY FOR THE BANKMAN-FRIED SHOW — Have you had enough of FTX? Too bad! Founder Sam Bankman-Fried is the headliner at the New York Times DealBook conference later today and communication pros are offering him a word of advice: Shut up, dude.

From Sam Sutton : "Sam Bankman-Fried squandered a multibillion-dollar cryptocurrency empire. Now he won't stop talking about it. The 30-year-old former executive has kept tweeting and talking to reporters since his digital asset exchange, FTX, collapsed under financial mismanagement in early November … 'Every time he opens his mouth, he increases his civil and criminal liability,' said Niki Christoff, a Washington-based strategic consultant who previously held leading policy communications roles at Uber and Google."

FIRST IN MM — The FTX debacle has spurred Senate Banking Chair Sherrod Brown to call on Treasury Secretary Janet Yellen to assist in crafting new legislation to crack down on crypto firms. "Single regulatory agencies currently generally do not have a comprehensive view of crypto asset entities' activities. I look forward to working on such legislation with you" and federal banking and markets regulators, the Ohio Democrat wrote in a letter to Yellen on Wednesday .

Earlier this month, Brown warned other lawmakers against moving too fast to create new rules for crypto, noting that Congress' efforts to-date have been the subject of intense lobbying by pro-industry groups seeking light-touch regulation. Many of those efforts were spearheaded by Bankman-Fried, a former political megadonor who's now the subject of multiple investigations in connection to the collapse of his firm, FTX.

Regulatory Corner

THE FIGHT OVER STOCK TRADING RULE CHANGES BEGINS — Our Declan Harty: "A Wall Street trading giant is suing the SEC for allegedly failing to fulfill a five-month-old records request related to the agency's upcoming slate of stock market reforms. Virtu Financial on Tuesday filed a lawsuit in the Southern District of New York against the SEC. It claims the agency violated the Freedom of Information Act in how it handled a June request for certain communications SEC staff had with financial executives and industry group representatives regarding planned rules related to the U.S. stock market's plumbing.

"The SEC's plans for reforming the stock market are drawing more questions from lawmakers as well. Now entering the conversation: Rep. Ann Wagner (R-Mo.). In a letter to SEC Chair Gary Gensler, Wagner, who figures to be one of the more senior Republicans on the House Financial Services Committee in 2023, questioned the need for the changes first outlined in June and how the SEC plans to propose them.

MILLION DOLLAR MORTGAGE — Our Katy O'Donnell: "Fannie Mae and Freddie Mac will guarantee mortgages worth more than $1 million for the first time next year in some parts of the country, their regulator said Tuesday."

Economy

BARCLAYS DELAYS RECESSION CALL — Augusta Saraiva: "Barclays Plc economists now see a US recession taking place one quarter later than expected in the wake of resilient economic activity, which should lead the Federal Reserve to delay the start of interest-rate cuts."

GIVE IT THE STERLING COOPER SPIN — WSJ's Jessica Toonkel and Will Feuer: "AMC Networks said it is planning to lay off about 20% of its U.S. employees , a sign of further disruption at a company that earlier Tuesday announced its chief executive had stepped down less than three months after taking the reins."

Markets

LIKE GOING ON A RUN BEFORE THE HOLIDAY PARTY — Bloomberg's Jill Shah and Claire Ruckin: "Banks in the US and Europe with around $42 billion of buyout debt stuck on their balance sheets are making the most of their last chance to get rid of it this year."

INVERTED DIVE — WSJ's Sam Goldfarb: "Yields on longer-term U.S. Treasurys have fallen further below those on short-term bonds than at any time in decades, a sign that investors think the Federal Reserve is close to winning its inflation battle regardless of the cost to economic activity."

Crypto

THE TITLE OF SBF'S DEALBOOK INTERVIEW IS "WHAT HAPPENED?" — NYT's David Yaffe-Bellany: "Mr. Bankman-Fried appeared deluded about FTX's prospects, insisting that he could find a way to keep the company running , the documents show. A day before the bankruptcy filing, he told employees that he was trying to raise new funding, and as recently as last week he said he regretted authorizing the bankruptcy."

CONTAGION — Muyao Shen and Vildana Hajric: "The fallout from the collapse of Sam Bankman-Fried's FTX crypto empire has spread to a new corner of the digital-asset market. Traders' focus has turned to the price disparity between Bitcoin and a derivative of the largest cryptocurrency called wrapped Bitcoin, which can be used on the rival Ethereum blockchain."

MORE FALLOUT — CoinDesk's Danny Nelson, Nikhilesh De: "Crypto fintech Prime Trust's CEO, Tom Pageler, was fired this week , CoinDesk has learned."

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Fly Around

EU states have debated whether to set a price cap as low as $62 a barrel on exports of Russian crude oil after several countries demanded a level that could put more pressure on Moscow, but the talks remain stuck, diplomats said. — Bloomberg's Natalia Drozdiak, Andra Timu and Irina Vilcu

The toll of China's unwavering approach to fighting Covid has rippled through the world's second-largest economy for months: Youth unemployment reached a record 20 percent, corporate profits sagged, and economic growth fell well below Beijing's own projections. — NYT's Daisuke Wakabayashi, Olivia Wang and Joy Dong

Germany followed Spain and Belgium in reporting slower inflation , offering ammunition to those who want the European Central Bank to ease the pace of interest-rate increases. — Bloomberg's Alexander Weber

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